Every quarter, Canterbury's Outsourced CIO committee shares their observations of the market that impact the management of our discretionary portfolios in the Canterbury OCIO Review.
During the last decade, the “lower rates for a long period” scenario has arrived with mixed blessings for the global economy. Capital has steadily flown into riskier assets, but despite aggressive monetary policies, economic growth has not maintained pace with the appreciation of financial assets. Despite negative yields offered by major developed market sovereign debt, such as 10-year German Bunds yielding -0.36% and 10-year Japanese Bonds yielding -0.10%, economic data has been soft in most countries, indicating a slowdown in global growth.
In the U.S., the fear of economic slowdown has led to a drop in near and medium-term Fed Funds rates — as estimated by both the Federal Open Market Committee (FOMC) as well as the market. It remains to be seen if reducing rates from their current low levels will succeed in stimulating economic growth or cause more concerns about the economy going into recession.